Inward transport

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Querist : Anonymous

Querist : Anonymous (Querist)

20 September 2013 What is the Accounting entry for Inward transport on which we are paying service Tax and the same we are taking credit.

Ganeshbabu K

Ganeshbabu K (Expert)
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20 September 2013 ON PAYMENT OF SERVICE TAX

SERVICE TAX CREDIT a/C
tO BANK ACCOUNT

Querist : Anonymous

Querist : Anonymous (Querist)

20 September 2013 Before payment of service tax what J.V we have to pass? And The entire amount we can't debit to Service tax A/c . we show Cess 2% & Cess 1% separately.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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01 August 2024 When accounting for inward transport where you are paying Service Tax and claiming Input Tax Credit (ITC), it's essential to correctly record the transactions to reflect the payment of service tax and the claim for ITC. Here’s how you can handle the accounting entries:

### 1. **Before Payment of Service Tax**

When you incur inward transport charges, you need to account for the expense and the service tax liability. The entry will record the expense and the service tax payable.

#### **Journal Entry Before Payment of Service Tax:**

**To record inward transport expense and service tax liability:**

```
Dr. Inward Transport Expense (Net of Service Tax) ₹XX,XXX
Dr. Service Tax Input Credit (18% or as applicable) ₹X,XXX
Dr. Education Cess (2%) ₹XXX
Dr. Secondary and Higher Education Cess (1%) ₹XXX
Cr. Accounts Payable/Bank ₹XX,XXX
```

**Explanation:**
- **Inward Transport Expense**: This represents the cost of transportation before adding service tax.
- **Service Tax Input Credit**: This is the amount of service tax on the inward transport which you can claim as ITC.
- **Education Cess** and **Secondary and Higher Education Cess**: These are calculated separately if applicable.
- **Accounts Payable/Bank**: This reflects the total amount payable to the service provider, including service tax and cess.

### 2. **After Payment of Service Tax**

When you pay the service tax to the government, you need to update your records to reflect the payment of the service tax.

#### **Journal Entry for Payment of Service Tax:**

**To record the payment of service tax:**

```
Dr. Service Tax Input Credit (18% or as applicable) ₹X,XXX
Dr. Education Cess (2%) ₹XXX
Dr. Secondary and Higher Education Cess (1%) ₹XXX
Cr. Bank/Cash ₹XX,XXX
```

**Explanation:**
- **Service Tax Input Credit**: Reduces the amount that you have claimed as credit.
- **Education Cess** and **Secondary and Higher Education Cess**: Reduces the cess amounts as you make the payment.
- **Bank/Cash**: Reflects the actual payment made.

### 3. **Summary**

- **Before Payment:** Record the inward transport expense and service tax liability separately. Ensure that you reflect the cess amounts if applicable.
- **After Payment:** Update your records to show the payment of service tax and the reduction of input credit.

### **Important Notes:**

- **GST Transition:** With the implementation of GST, the previous service tax and cess will be replaced by GST. Ensure that you follow the updated regulations and procedures for GST.
- **ITC Claim:** Ensure that you are correctly claiming the ITC as per the GST laws and maintaining proper documentation for audits and compliance.

By following these steps, you ensure accurate accounting of inward transport expenses, service tax payments, and claims for ITC.

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